Police cordoned off a square in Armenia’s second largest city of Gyumri on Tuesday to stop angry protests by local car owners against the abolition of a legal loophole that has allowed them to pay significantly lower import taxes.

The protests began on Saturday, the day when the measure took effect. Dozens of cars carrying Georgian license plates blocked a section of the Gyumri-Yerevan highway on Monday.

Under the existing Armenian legislation, a car owner has to pay customs and value-added taxes worth 32 percent of the market value of their imported vehicle in order to obtain license plates. Cars registered abroad have until now qualified as “temporary imports” and been exempted from these duties.

Many Armenians have for years made use of this loophole by registering their cars with road police in Georgia, where import tax rates are considerably lower than in Armenia. The practice was especially widespread in the country’s northern regions bordering Georgia. It was also not uncommon among luxury car owners in Yerevan.

According to the State Revenue Committee, more than 10 percent of some 430,000 vehicles driven in Armenians had foreign license plates as of late last year.

Armenia -- A car with Georgian license plates in Yerevan, 26Aug2010.

The Armenian government abolished the “temporary import” arrangement in August. The decision meant that the owners of such cars had to register them with the Armenian road police and pay hefty taxes by February 5.

On Monday, several dozen drivers gathered outside the administration of the Shirak province bordering Georgia, of which Gyumri is the capital. They blocked a major city thoroughfare and then headed to the Gyumri-Yerevan highway after the regional governor, Ashot Gizirian, refused to meet with them.

“You are violating public order, this is a highway of national significance,” a senior police officer warned the protesters there.

“We have gathered here so that they listen to us,” countered one driver. The road was unblocked less than an hour later.

The protesters planned to again converge on a square outside Gyumri’s central bus station and drive to the Georgian border on Tuesday. However, the protest did not go ahead as the square was surrounded by more than a hundred police officers early in the morning. The police detained three protesters and impounded their cars.

“We are making sure that public order is not disrupted,” Hakob Bichakhchian, the chief of Gyumri’s police department, told RFE/RL’s Armenian service at the scene.

Later in the day, the protesting drivers gathered in the offices of the Asparez Journalists’ Club, a Gyumri-based civic organization that has backed their demands. They said they will resume their demonstrations on Thursday.